The Labor Force Contraction

There’s no single, tidy explanation for what triggered the increase [in the labor force] in the first place or why it’s come to an end, but the single clearest factor is that last century women began pouring into the work force — a phenomenon that came to an end in the last decade. “The women who are going to enter have entered,” says Dean Baker, co-founder of the Center for Economic and Policy Research. All else being equal that explains why the labor force participation rate would flatten.

Brad Plumer explores other possible explanations, such as mass boomer retirement. Meanwhile, Yglesias points out that the employment population ratio is a bad predictor of economic growth:

Conventional wisdom has it that the labor market in low unemployment Germany is currently quite healthy. But emp-pop says that there's been no time in all of recorded history when the German labor market has been as healthy as the U.S. labor market was at the depth of the recession. Conventional wisdom also says that Sweden made a comeback from the Nordic Financial Crisis of the early 1990s and learned valuable lessons that helped it whether the Panic of 2007 much better than the world's larger industrialized countries. What emp-pop says is that Sweden has been in a persistent depression for the past twenty years.